Scottish Court of Session Decisions

On or about 22 September 1995 the pursuers took entry to the heritable subjects known as "Rochomie", 25 St Andrews Road, Lhanbryde upon payment of the price of £111,000. The purchase followed the submission of a formal offer on 30 August 1995. They aver that in or about June 1996 they discovered for the first time that the property was affected by extensive ingress of water and timber decay. In particular it is averred that the valley gutters to the front elevation were in a poor state of repair and had allowed the ingress of rain water. The rain water goods on the front elevation required attention. There was extensive and widespread dry rot, attributable, it is said, to the defective state of the rain water goods and valley gutters. In the present action they sue for damages of £50,000 arising from of the purchase of the property. In particular, the pursuers seek payment jointly and severally, or severally, against the first defenders, a firm of estate agents, against the second defenders, a firm of solicitors and against the third defenders, who, it is averred, are professional timber specialists.

In relation to the first defenders, the pursuers aver that in or about August 1995 the property was being marketed by them, but nevertheless they offered to organise a survey on behalf of the pursuers. Messrs D M Hall were duly instructed to carry out a mortgage valuation on behalf of the pursuers and to send a written report to the Woolwich Building Society. A written report dated 30 August 1995 was prepared by Messrs D M Hall. It is averred that in that report not only was it recommended (certain evidence of woodworm having been discovered) that a timber specialist be instructed to carry out inspection of the entire property, but that in addition the surveyors identified a series of faults which might require rectification. It is averred that notwithstanding this the first defenders' manager telephoned the pursuers to advise them of the results of the survey and advised that the report was generally satisfactory. She did not, it is said, appraise the pursuers of the full extent of the surveyor's findings. The pursuers aver that had the full terms of the report been disclosed to them they would not have proceeded further with the transaction. The case made against the first defenders is, in essence, that they failed in their duty not to mislead the pursuers as to the contents of the report. At the outset of the procedure roll debate before me counsel for the first defenders intimated that he was no longer proposing to advance arguments in support of their first plea-in-law (being a general plea to the relevance and specification of the pursuers' case) and he sought, and was given, leave to withdraw. It was intimated that following certain discussions the expectation was that the first defenders would in due course be released from the action.

As regards the second defenders, the pursuers aver that they acted on their behalf in connection with the transaction and that, in particular, on or about 30 August they instructed the second defenders to submit a formal offer to purchase the subjects. They aver that the second defenders were also instructed to arrange a loan on behalf of the pursuers, and that an offer of loan was made by the Woolwich Building Society and sent direct to the second defenders. This, it is said, was accompanied by a copy of the D M Hall report. In terms of the offer of advance the borrower undertook, it is said, to carry out certain roof repairs and to check the condition of roof and gutter. The second defenders accepted the offer, using a power of attorney which had been granted in their favour. Although it is said that it would have been obvious to the second defenders that neither the conditions of the loan nor the terms of the D M Hall report had been seen by the pursuers, the second defenders did not appraise the pursuers of their contents or check whether the pursuers were aware of them. The pursuers offer to prove that had they been aware of the terms of the report or of the offer of advance they would not have proceeded further with the transaction. It is also averred:

The case made against the second defenders is that it was their duty as reasonably competent solicitors acting under and in terms of the contract with the pursuers to ensure that the pursuers were aware of the terms of the surveyors' report and the offer of advance and, further, separatim that it was their duty to insert a clause in their offer to the effect that the seller was unaware of woodworm, dry or wet rot or rising damp. It is averred that no professional solicitor of average skill exercising reasonable care would have failed to comply with these duties.

In relation to the third defenders, the pursuers aver that they:

An inspection was carried out and a report was prepared. It is averred that the report stated that there was a scattered infestation of common furniture beetle in the roof space; that there was a "very slight dampness to joist ends at the front door" but that the rest of the property was "in a good and dry condition". The pursuers, it is said, received a copy of the report and took comfort from its terms. They relied upon the contents of the report, including the fact that the problems which had been identified were of a limited nature and could be remedied at relatively small cost. They went ahead with the transaction on that basis. Had they been aware of the scale of the problems they would not have proceeded with the transaction. The case made against the third defenders - apparently based on breach of implied duties under contract - is that they failed inter alia to have due regard to the condition of the rain water goods and the valley gutters and the condition of the external masonry, and in their duty to look out for visible evidence of timber decay in each of the rooms and in their duty - in the event that they were unable to check the condition of any part of the property - to ensure that a clear statement to that effect appeared in their report. No professional timber specialist of average skill exercising reasonable care would, it is averred, in the circumstances have failed to comply with said duties.

As a result of the defenders' failings the pursuers claim to have suffered loss, injury and damage. Had they been properly advised they would not have purchased the subjects.

The valuation made by Messrs D M Hall of £111,000 (at which price the pursuers' purchased the property) was, it is said, reasonable given the limited nature and scope of the report. The actual value of the property at or around the date of purchase, having regard to the fact that it was already badly effected by timber decay, has, it is averred, been estimated at £91,000. The pursuers therefore claim to have sustained a loss of £20,000. They also aver that esto they are not entitled to recover the full diminution in value of the subjects, they are entitled to recover the cost of rectifying the timber decay together with various associated professional expenses. In addition, the pursuers claim to have suffered considerable inconvenience and anxiety as a result of living in the property whilst substantial repair work has been going on. They claim that they required to borrow money to carry out the work and incurred interest charges to the Royal Bank of Scotland. They further claim to have incurred expense in redecorating the property after the remedial works. In addition, it is averred:

At procedure roll counsel for the second defenders and counsel for the third defenders both sought to advance arguments in support of general pleas to the relevance and specification of the pursuers' case against them.

In the first place, counsel for the second defenders argued that the pleadings did not disclose any relevant causal link between the second defenders' alleged breach of contract and the losses claimed. It was argued that on the face of the pleadings the sole cause of the pursuers' loss was the negligence of the first defenders, or in any event, of the third defenders - both of which occurred before the second defenders were instructed. It was important to notice that it was averred that had the first defenders and the second defenders carried out their duties properly the pursuers would not have proceeded further. Counsel for the third defenders, for her part, presented a similar argument to the effect that there was no relevant causal link averred between the alleged failures of the third defenders and the losses claimed. Causation of the pursuers' loss apparently began and ended with the actings of the first defenders. Given that the pursuers were offering to prove that but for the first defenders' failures they would not have proceeded any further, she, like counsel for the second defenders, submitted that this could not be regarded as a case of wrongdoers jointly contributing to a loss.

Counsel for the pursuers submitted that these arguments were misconceived. The pursuers were suing for losses which they claimed were caused by the failings of all three defenders prior to the purchase of the property. Their losses arose by reason of that purchase. The fact that the first defenders' negligence may have occurred earlier was neither here nor there. On the pursuers' averments each of the defenders had distinct opportunities to prevent the sale taking place and each failed to do so. There was no reason why all should not be sued. If a man decided in advance not to proceed with a course of action without obtaining two favourable medical reports, there was no reason why he could not sue both doctors instructed if their (favourable) advice was negligent. There was no reason to confine such a pursuer to action against the first doctor instructed.

On this matter I consider that the submissions made on behalf of the pursuers are entirely well founded.

Counsel for the second defenders also submitted that part of the case made against the second defenders(namely that it was their duty to insert a clause in the offer that the seller was unaware of woodworm, dry or wet rot or rising damp) was irrelevant. In particular, although the pursuers offered to prove that the sellers would have deleted such a provision (and that this would have alerted the pursuers to the possible presence of more widespread decay), all that was said was "Given the extent of the decay that already existed the seller would probably have deleted such a provision." This was a non sequitur, in particular in the absence of any offer to prove that the sellers knew of the woodworm, dry or wet rot of rising damp in the house.

Counsel for the pursuers argued that enough had been averred, particularly having regard to the averments of the defects which existed. He pointed to an averment that the sellers had claimed to D M Hall that woodworm in the roof had been treated. It was not necessary for the pursuers to prove knowledge on the part of the sellers.

On this matter I consider the arguments of the second defenders are well founded. Merely to prove the extent of decay would not, it seems to me, take the pursuers far enough in the absence of proof of some degree of knowledge, or at least belief or suspicion, on the part of the sellers relating to that, such as could lead to their taking the action described (and indeed to the pursuers taking something from that). The pursuers do not offer to prove this. If anything the reference to what the sellers said to the surveyors is unhelpful. In these circumstances in my view the averments in relation to this at page 16D-E and at page 22E-23B fall to be excluded from probation.

Counsel for the third defenders further submitted that no relevant factual basis had been averred to support the apparent case of breach of contract made against these defenders (or, in any event, to support all parts thereof), which could also impact on the question of causation. It was important for the pursuers to aver clearly the basis upon which it was said that duties arose inter alia to take measurements to determine the level of dampness throughout the property and to have regard to the condition of the rain water goods and valley gutters and the condition of the external masonry. Instead the pursuers' averments left it unclear by whom instructions were given and what they were. There was an apparent discrepancy between the claim that the third defenders were instructed to carry out an inspection of the whole property, and the averment that the instructions were to carry out a timber inspection of the entire property.

Counsel for the pursuers argued that it was reasonably clear, on a fair reading, that the pursuers were seeking to establish that the instructions given by them or on their behalf were to carry out a timber inspection of the entire property. This was not inconsistent with the earlier sentence. As to the content of duties which arose by implication on acceptance of these instructions, the pursuers were offering to prove what timber specialists of average skill, exercising reasonable care, would in the circumstances have done (and in particular, that the third defenders, in the various respects averred, did not do what such timber specialists would have done).

On this matter it seems to me that the submissions on behalf of the pursuers are to be preferred, and that at least sufficient averments have been made to entitle the pursuers to a proof before answer.

Counsel for the third defenders also expressed concern about the presence of certain averments which narrated that the discovery of the true extent of the decay, in June 1996, occurred after the third defenders had attended, following the pursuers taking entry in September 1995, to carry out certain remedial work. She readily accepted that, on the face of it, these averments were probably only narrative, so far as the present action was concerned, but there was concern that they might be used to found further and separate claims against the third defenders. I am satisfied, however, as indicated by counsel for the pursuers, that the averments are indeed presently there only for narrative purposes, and that there is nothing in the present Record which would entitle the pursuers to make any more of them.

Counsel for the second and third defenders also both attacked the relevance of the pursuers' claim for damages insofar as based on difference in value. The argument for the second defenders was that there was a logical inconsistency in the choice of the upper value of £111,000, being the value which Messrs D M Hall had placed upon the property (the same report which the pursuers claim the second defenders should have checked that the pursuers knew of). Counsel, however, did not, at this stage at least, wish to develop any more fundamental argument which might arise as to whether the problems which are said to have given rise to the difference in value could properly be said to be linked to the second defenders' alleged actings. It was, in particular, accepted that the claim for repairs was sufficiently relevantly made for a proof before answer. Counsel for the third defenders for her part submitted that prima facie this was a case in which the proper measure of loss was the cost of repairs. Reference was made to Banque Bruxelles SA v Eagle Star 1996 W.L.R. 87, a case concerning the proper measure of loss where a contract is entered into following a defendant's breach of duty to take care to provide accurate information. Reference in particular was made to the speech of Lord Hoffmann at page 97 where it is said that in such a case "the measure of damages is the loss attributable to the inaccuracy of the information which the plaintiff has suffered by reason of having entered into the transaction on the assumption that the information was correct". In a case where the inaccurate information was a deficient valuation (as was the case in Banque Bruxelles SA v Eagle Star), it could more readily be said that difference in value would be an appropriate measure of loss. By contrast, in a case such as this, the cost of repairs would be a more appropriate measure. Both counsel also argued, in the alternative, that it was for the pursuers to chose in their pleadings what the appropriate measure of damages was, and that the case presented (difference in value or, alternatively, cost of repairs) was irrelevant.

In response, counsel for the pursuers argued that in cases such as this - where a disadvantageous contract had been entered into as a result of inadequate information supplied - the preferred measure was the difference between what was paid, in reliance on the defenders, and the true value. This was well established both in Scotland and in England, and covered a variety of potential defenders, including surveyors and solicitors and indeed any person giving information. The line of authority was consistent with, and was not affected by, the decision in Banque Bruxelles SA v Eagle Star. Reference was made to Stewart v H A Brechin & Co &c 1959 S.C. 307, Martin v Bell-Ingram 1986 S.L.T. 575, Ford &c v White & Co 1964 1 W.L.R. 885 and Watts &c v Morrow 1991 1 W.L.R. 1421. The starting point for the pursuers in this case was the price they had paid - in reliance inter alia on the value placed upon the property by D M Hall, assessed in ignorance of the true defective state of the property. Further, the cost of repairs was not wholly irrelevant. It might have relevance as a cross-check. Difference in value was only the preferred measure and it might be that after proof (in particular if the pursuers established some but not all of the alleged duties) the costs of repair or some of them would be thought to be more appropriate. In these circumstances there was nothing to prevent the pursuers from pleading their case in the alternative.

I am satisfied that on this matter the pursuers' submissions are well founded.

Lastly it was submitted on behalf of the second defenders that the pursuers' claims for alternative rental accommodation in London, and the associated cost of travelling and additional living expenses, were self-evidently too remote. In a case of breach of contract the appropriate starting point was the well-known dictum of Alderson J. in Hadley v Baxendale 1854 9 Ex. 341 at pages 354-5, where it was said:

Reference was further made to the leading speech of Lord Jauncey of Tullichettle in Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc 1994 S.L.T. 807 at page 809 where, commenting on Hadley v Baxendale, he said:

The pursuers were not offering to prove any special knowledge on the part of the defenders about where the first pursuer worked or would work or any likely intention to sell the property within a reasonably short space of time. Remoteness was, it was accepted, ordinarily a question of fact, but in the circumstances of this case it was a matter which could be decided at this stage. In any event, it was not clear that any relevant basis had been laid for these claims - in particular standing the pursuers' primary position that the defects which were discovered did not render the subjects unsaleable but only saleable at a substantially reduced price (for which difference in value the pursuers were already claiming). Counsel for the third defenders essentially adopted the submissions made on behalf of the second defenders.

On behalf of the pursuers it was submitted that they were offering to prove that by reason of the defects the property was virtually unsaleable. This was not inconsistent with the property having a nominal or notional market value. In part the claims under discussion related to a period when the repairs were in fact being carried out. Counsel did not, as I understand it, dispute the legal tests for remoteness which had been referred to (in relation to either of the two defenders who took this point), and it was also accepted that the pursuers were not offering to prove any special knowledge on the part of the defenders or either of them. The losses claimed could nevertheless plainly be seen to be losses naturally and directly arising, and of a type which were foreseeable - even if the precise detail was not. It was accepted that this was a matter which could properly be decided at this stage. In particular it was not submitted that the Court could be helped by hearing evidence first. Reference was made to Cochrane v Graham & Sibbald 1987 S.C. 63. In that case the husband pursuer was found entitled to travelling costs from the pursuers' original home in Scone to his work in Dundee during a nine month period, following the purchase of a new but defective house in Dundee, in which extensive repairs required to be carried out.

In the first place I am not persuaded that the pursuers have averred a relevant basis for the costs which are claimed. It is in my view not made clear why the subjects were unmarketable, and I confess that did not wholly understand the explanation which was offered. The claim would of course be understandable if the need to sell arose during repairs, but that is not said, at least clearly. Secondly, testing the pursuers' averments at their highest, (that is that during the time when repairs were being carried out they required to move), I have come to the view on balance that the costs claimed are too remote. Inevitably it must be a matter of degree in any case. The proper approach would appear to be whether the losses in question could be said, from the defenders' point of view, to have been not unlikely, or quite likely, to occur - to take two phrases from Lord Reid's speech in Czarnikow Ltd v Koufos recently referred to with approval in Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc, (although it is clear from the whole terms of the speech that although Lord Reid spoke of "a very substantial degree of probability", he did not mean that it was necessary that the prospects be better than even). In this case, while it seems to me that it can be said that it was not unlikely that repairs would be needed, and within a relatively short time, and that during repairs the property might be unsaleable, I do not think it can be said that it was not unlikely, or quite likely, that at the time the repairs were carried out the pursuers would wish to sell, and that the reason for that would be that the first pursuer needed to move to a substantially different location to be nearer his work - albeit all of that was no doubt possible. The circumstances in Cochrane v Graham & Sibbald were very different - notably the pursuers in that case had been prevented from moving to the Dundee house which they had purchased. In any event, it is not clear that that was a case in which the claim was presented or assessed as a breach of contract. In these circumstances, in my view, the pursuers' averments from 28A-B (the sentence beginning "In 1997 ...") to 28E (the sentence ending "... alternative accommodation.") fall to be excluded from probation.